Canadian Dollar Slips Ahead of BoC Decision as Trade Concerns Weigh

 Key Takeaways:

*Canada’s departure from trade talks with the U.S. raises concerns in the market. 

*The Canadian dollar eases ahead of next week’s Bank of Canada (BoC) rate decision.

The Canadian dollar (CAD) has experienced a notable decline in strength against major currencies this week, as markets brace for the Bank of Canada’s (BoC) interest rate decision slated for next week. The CAD’s underperformance stems primarily from Canada’s divergence from other major economies, which have secured a temporary tariff pause with the United States and initiated further trade negotiations. As a key U.S. neighbor and one of the first targets of the Trump administration’s high-tariff policies, Canada’s lack of visible progress in engaging with the U.S. on trade has raised concerns among investors, undermining confidence in the currency.

Partially offsetting these pressures, a recent uptick in crude oil prices has provided modest support to the CAD, given Canada’s significant energy exports. However, market participants anticipate heightened volatility in the week ahead, as the BoC’s interest rate decision is expected to introduce further uncertainty. Investors will closely monitor the central bank’s guidance for indications of its stance on monetary policy amid evolving global trade dynamics and domestic economic conditions.

Technical Analysis

USDCAD, H4

As anticipated, the USDCAD pair encountered resistance near its previous high below the 1.3880 level, prompting a technical retracement. However, the decline was contained at the 38.2% Fibonacci retracement level (1.3785), reinforcing the pair’s position within its prevailing uptrend.

Momentum indicators remain supportive of further upside potential. The RSI continues to hold above the 50 neutral level, while the MACD is approaching a bullish crossover above the zero line. These signals suggest strengthening bullish momentum, which could propel the pair toward new multi-week highs.

Resistance levels: 1.3890, 1.3985

Support levels: 1.3785, 1.3700